Cutting Edge December 2008

Save GM? by Art Raymond, araymond@raymondnet.com

In the good old days of the 50s and 60s, many believed what was good for General Motors was good for America. GM and its Big Three motor car brethren were a huge part of the U.S. economy, an efficient nationwide machine that used mass production to win a world war and bring rise to a prosperous middle class of Americans. In those halcyon days of yesteryear, big businesses across a wide spectrum of products partnered with powerful unions to set generous wage and benefit packages in exchange for a reliable supply of workers. Economic growth and prosperity, it was thought, could be guaranteed by adherence to Keynesian economics and New Deal legislation. Or so the Big Three, the United Auto Workers, and left-leaning politicians of the time believed.

But that experiment in a Scandinavian-style welfare state proved short lived. The American economy is made up of hustlers who like their independent, pioneering ancestors prefer to get ahead through hard work rather than handouts. Making more with less, being the low cost producer, is the ideal that all well-managed companies strive for. Today, the successes of Wal-Mart, Apple Computer, and others testify to the importance of competitiveness. Survival of the fittest is more than a cliché in the U.S.
Beginning in the late 50s workers across the country turned their backs on unions. Companies in right-to-work states built non-union plants that employed workers at lower wages. And global competition in the form of cheaper, better built Toyotas, Nissans, and Hondas hit American roads and highways. When the Japanese motor car companies built non-union plants in the U.S., the jig was up. Detroit simply could no longer compete.
The legacy of high wages and benefits proudly negotiated by the Big Three and the UAW have inexorably consumed our home-grown motor car industry. History contains similar stories in the steel and airline industries.

Sadly those workers who believed the dream of a secure, overpaid job for life are the most injured. Thankfully, the real U.S. economy, that rough and tumble miracle, will inevitably provide for those who are flexible and unafraid of work. The fittest will survive.

Since I wrote the above words in the fall of 2005, little has structurally changed at GM, Ford, and Chrysler. But the recent, sudden drop in auto sales has made their situation critical. With U.S. auto sales running at an annual rate of only 10.5 million, even the Japanese car companies cannot make a profit and are idling capacity. Detroit's automakers are burning cash at an astronomical rate to keep their heads above water.

Why shouldn't GM file for Chapter 11 bankruptcy protection? After all, that alternative was created precisely to give a company time to restructure its business. GM and Ford have solid long-term prospects in Europe and emerging markets. For GM 65 percent of sales now come from outside of America. Total car sales in the BRIC countries - Brazil, Russia, India, and China - now exceed those in the U.S. The smaller, fuel efficient cars that American automakers produce in these markets are profitable.

The problem, of course, is their North American operations. While the Big Three has shuttered two million units of annual capacity and made significant productivity gains, labor costs remain stubbornly high. A deal made in 2007 with the UAW will strip about $1,000 in legacy costs from every car made beginning in 2010. But the average hourly labor cost for the Big Three is $29 higher than for non-Detroit car makers. Plus the current contract forces the carmakers to pay laid-off workers about $70 per hour in wages and benefits. This "Jobs Bank" costs the Big Three close to $500 million over the past year. Honda just built a sparkling new, non-union plant in Indiana for $550 million.

In addition, GM alone provides health benefits for a million people only a fraction of who are current employees. The old joke is really true: GM is no longer a car company that provides health benefits but a health-care company that happens to build cars.

Washington's complicity in the Big Three's woes is often overlooked. A huge factor in the UAW's power over Detroit is Congress's fuel efficiency standards aka the CAFE rules. This regulation dictates the average miles per gallon that a carmaker must achieve for the vehicles it sells. For passenger cars the standard is 27.5 mpg; for light trucks, 22.5 mpg. Imported vehicles do not count in the CAFE calculation. The Big Three cannot simply move production of smaller, fuel efficient cars to Spain where the UAW is not an issue. It's clearly their U.S. labor costs, not the salaries of their CEOs and the expense of their private jets.

In the hearings on an auto industry bailout, Congress asked the Big Three for a business plan. Holman Jenkins in a recent Wall Street Journal op-ed offered two reasonable strategies they might incorporate in such a plan:

2. Use the bailout cash now being considered to buy out the union—The carmakers could then staff their plants with workers earning a pay package comparable to that paid in foreign-owned U.S. car factories.

Without resolving the labor cost issue, any bailout will just prolong the misery and add to the cost the taxpayer will ultimately bear.

Of course, politics will compromise a true, sensible solution to Detroit's problem. Everyone knows the main issue, but recent history has shown Congress' propensity to postpone tough decisions that ruffle their constituencies.

Chapter 11 for the Big Three is the best solution but not without its problems. Industry suppliers must be paid, and the risk that consumers will not buy a car from a bankrupt company must be overcome. Government-supplied debtor-in-possession financing to ensure the viability of the supply chain combined with sales incentives and news that the filing is only temporary can avert this stigma. Detroit is indeed a special case, and its handling has long-term consequences for U.S business. Our choices are clear. Either cede control to Congress by virtually nationalizing the Big Three in a fit of populist rage. Or rationally use a tried and true method that gives control to an experienced bankruptcy judge.

In the end, the Big Three must put itself on a competitive footing with the rest of the auto industry. The bottom line remains as it was three years ago in my original article...

Bottom Line: So in the end, what is good for GM is good for America. Competition makes us all better. Like a dinosaur the GM of old will disappear. Let the economic lessons learned from its history never be forgotten.

Russians Delay Log Export Tax

The Russian government has announced a delay in the implementation of an export tax of 80 percent on softwood logs and 50 percent on hardwood logs. The tax, originally scheduled to take effect on January 1, will be postponed for nine to 12 months. The current log tax of 25 percent with a minimum of €15 per m3 installed on April 1, 2008, will remain in effect.

The tax is designed to push development of the Russian log processing industry and is creating havoc in the country's main export markets, China, Japan, and Finland. The delay will enable these buyers to identify alternative sources for logs and lumber. Japan has reduced log purchases from Russia by 50 percent this year; China, by nearly 25 percent. China has increased its purchases from Canadian suppliers by 58 percent this year.

Eroded confidence in Russia's future log/lumber supply credibility and heightened investment risk are significant side effects of this delay. The shifts in sourcing to other countries confirm the opinion that Russian saw mills cannot supply the volumes of wood demanded by China and other users. This situation should benefit Canada and New Zealand softwood suppliers.

Lacey Act Enforcement Delayed

The U.S. Department of Agriculture has postponed the enforcement date for the new Lacey Act import declarations for wood furniture and components. The Act, originally promulgated to prohibit illegal trafficking in wildlife, was amended this year to combat illegal logging.

Under the new law importers are required to declare the origin and species of wood products. As illegally harvested logs often sell for lower prices, foreign producers using these logs to manufacture exports for the U.S. market reportedly have a material cost advantage as high as 50 percent. Forcing these producers to pay market price will improve competitive conditions for both U.S. log exporters and U.S. value-added wood products firms.

Economic Fact
Eventually the education of a country's citizens determines the state of its economy. Thus the findings of the recent United Nations study of education systems around the globe are troubling. Out of 24 countries, the U.S. ranks 18th in tests used to determine the reading, math, and science abilities of 14 and 15-year old students. South Korea and Japan rank at the top while Germany surprisingly falls in at 19th.

Sector Report

Kitchen Cabinets

According to the KCMA's Trend of Business Survey, October cabinet sales fell by 22.3 percent versus the same month last year. Year to date cabinet sales have dropped 17.8 percent vs. 2007. Stock cabinet sales were down 18.5 percent, custom sales down 18.8 percent, and semi-custom sales off 16.9 percent showing weakness across all price points.

At the company level…

Masco reported that its cabinet sales fell by 15.9 percent in its 3Q2008. Operating margin declined to 5 percent, down from 14.7 percent last year.
American Woodmark announced a 16 percent decline in its 2Q2009 sales. The company continues to grow market share in a very weak environment. Gross profit fell to $19.5 million, down nearly 30 percent. As a result, the company lost $1.1 million.
MasterBrand Cabinets announced the closure of its Richmond, IN, semi-custom kitchen plant. About 275 employees will be idled.

Home Furniture

2008 Furniture Shipments to Fall
Industry analyst Jerry Epperson is now forecasting a 7.2 percent decline in U.S. furniture and bedding shipments in 2008 and a mild 1.7 percent rebound in 2009. His predictions also show that industry shipments will not regain its 2006 peak until 2011.

Retail sales of home furniture are down an annualized 23 percent over the past four months.

Value of Furniture Industry Plummets
In 2002 the stock of the major publicly-traded U.S. furniture companies (Bassett, Chromcraft, Ethan Allen, Flexsteel, Furniture Brands, Hooker, La-Z-Boy, Stanley, and Havertys) was valued at over $6 billion. As of mid-November you could buy those companies for less than $1.5 billion.

North Carolina Training for Upholstery Workers
No surprise. Apparently the closure of so many U.S. furniture plants is resulting in a shortage of young workers wanting to enter the industry. As a consequence four North Carolina companies—Baker, Brayton, KI, and High Point Furniture—have initiated a program to train prospective upholsterers. The program, called CRAFT, is funded by a $165,000 federal grant to Guilford Technical Community College.

At the company level…

Furniture Brands International, the second largest U.S. furniture maker/importer, reported a 17.6 percent decline in 3Q2008 sales. Gross profit dropped by 14.8 percent to 21.7 percent. As a result the firm lost $13.7 million in the quarter vs. a profit of $5.3 million in the same quarter last year.
Producer/retailer Ethan Allen announced that its 1Q2009 sales were down 17.2 percent to $206 million. Operating margin declined to only 12.2 percent from 27.8 percent in the previous year.
Producer/retailer La-Z-Boy reported a net loss of $53.7 million for its 2Q2009. Sales continued to drop across all product lines with upholstery falling 8.1 percent; case goods, 17.1 percent; and in their retail stores, 14.5 percent. As a result, the company will lay off about 10 percent of its work force, about 850 workers. Parts of this move include the closure of 15 to 20 under performing stores and the reduction of FY2009 capital expenditures from $27 million to $18-20 million. Early next year the company will close its 280,000 sq. ft. Bauhaus USA upholstery plant in Sherman, MS, and eliminate 150 jobs. Production will be shifted to its Saltillo, MS, plant.
Bassett Furniture posted a $2.7 million loss in its 3Q2008 on a sales decline of less than 1 percent. For the nine months sales rose by 3.3 percent.
Stanley Furniture said its 3Q2008 sales fell 25.6 percent to $54.5 million. Due to a restructuring charge the company lost $3.5 million. For the nine months sales dropped by 18.4 percent. To rejuvenate its domestic production the company is now offering 14 finish options on its Coastal Living product line, a level of customization more associated with the cabinet industry. Lead time on this line is less than 30 days thus making the product available to U.S. retailers much faster than imported goods. The company currently makes about 70 percent of its line in the U.S. and is now one of the largest domestic case goods producers.
In a sign that furniture regardless of origin is not selling at retail, ArtCraft Furniture has ceased operations in the U.S. The company was owned by Ningbo Art Furniture, a Chinese furniture producer, and was established to sell directly to U.S. retailers.
Chromcraft Revington reported a 3Q2008 loss of $10.2 million as sales fell by nearly 19 percent.
Upholstery producer Flexsteel said its 1Q2009 residential furniture sales were off 1 percent.
Furniture maker Jasper Cabinet has been acquired by the Theater Xtreme Entertainment Group, a publicly-traded company that operates a chain of home theatre design centers.
Riverside Furniture has idled 250 workers at its Ft. Smith, AR, plants and will consolidate its Plants 2 and 6 into a single operation in January.
Vaughan-Bassett Furniture announced plans to close its Elkin, NC, plant and idle 400 workers. The company has operated the 700,000 sq. ft. plant for nearly 40 years and plans to reopen the facility when business recovers. As a result, its Galax, VA, plant will resume a full work schedule.
Baker Furniture laid off 117 workers at its Hildebran, NC, plant. Last year the company closed two plants in Mocksville, NC, and consolidated that production to Hildebran.
Bradington-Young, the leather upholstery division of Hooker Furniture, is cutting its work force by 54 at its Cherryville and Hickory, NC, plants.
Furniture frame maker Frank Chervan is closing several of its operating units in its Bedford, VA, plant. About 90 employees will be affected. The company produces hardwood furniture frames for wood and upholstered seating. Its Roanoke, VA, plant will continue in operation.

Office Furniture

BIFMA, the sector trade association, reported a 6 percent decline in October orders and a 2 percent rise in shipments. Year to date, orders and shipments are essentially flat vs. 2007. Analysts are now cautious about this sector's prospects given weakening in demand drivers such as white-collar employment, new office construction, and corporate profits.

At the company level…

Steelcase, the world's largest manufacturer of office systems and business furniture, has warned that its 3Q2009 revenues will fall to $805 million from its previous guidance of $840 to 875 million.

HNI Corporation announced that its 3Q2008 office furniture sales were flat vs. the same period last year.

Knoll Inc. reported an 11.6 percent rise in its 3Q2008 sales to $283.5 million.

Wood Flooring

A study released by the U.S. International Trade Commission reported that the U.S. wood flooring industry experienced a major increase in offshore competition over the past five years. Imports rose from $1.2 billion in 2002 to $2.7 billion in 2006 before falling back with the decline in home building to $2.4 billion in 2007. Like in wood furniture, the primary culprit is China, which is now the world's largest wood flooring producer.

While the volume of solid wood flooring produced in the U.S. rose through 2006, the value of domestic shipments peaked at $1.5 billion in 2004. During that time the market share of imports grew from about 16 percent to nearly 31 percent in 2006. The import share fell back to 27 percent in 2007.

Residential housing accounts for about 80 percent of wood flooring sales. Consumer tastes are trending away from domestic species like oak and traditional appearance in favor of more exotic species, wider plank flooring, and rustic looks like hand scraping. Plank flooring now has about 35 percent of the U.S. market. Also a significant share of all wood flooring is now factory finished.

The study found that U.S. producers' costs were competitive with foreign flooring plants with the exception of labor.

At the company level…

Armstrong Hardwood Flooring announced 3Q2008 sales of wood flooring down 11 percent to $171 million.
Lumber Liquidators posted 3Q2008 sales of $123.1 million, ups nearly 21 percent. Same store sales rose 2 percent.
Mohawk Industries reported a 9 percent decline in 3Q2008 sales. Business deteriorated for its Unilin laminate flooring line with sales down 5.5 percent.

Non-Residential Construction

The American Institute of Architects' Architecture Billings Index dropped to an all-time low of 36.2 in October, down from 41.4 in September. Inquiries for new projects hit 39.9, also an all-time low.

The AIA's chief economist noted that government and non-profit projects are suffering from an inability to finance through the bond market. This institutional sector had been providing some strength in non-residential construction.

PUBLIC POLICY

Tax Rates, by John Satagaj, email@jsatlaw.com

In the upcoming months we are likely to have a robust debate about whether to increase the top individual marginal tax rate or to lower the top C Corporation marginal rate. I think we would all answer, "That's easy, do not raise the individual rate and lower the C Corporation rate." Unfortunately, in the world of Washington, I suspect Congress and the administration will be looking for trade-offs.

The individual rate discussion is being driven by the fact that under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) the top individual marginal income tax rate was reduced to 35 percent. It will return to its pre-EGTRRA level of 39.6 percent in 2011. Sole proprietors, partners, and S Corporation shareholders pay tax on their business income on the individual rate schedule. We have a lot of S Corporations in the WMMA membership.

President-elect Obama pledged to eliminate the temporary rate relief for family taxpayers with taxable income over $250,000, before it expired. He spoke of doing so in the context of paying for health care reform. His proposal included restoring the two top rates to 36 and 39.6 percent respectively adjusted to affect only families over $250,000. For those in the top two income tax brackets - likewise adjusted to affect only families over $250,000 - he would create a new top capital gains rate of 20 percent. The top dividends rate for families making over $250,000 would be set at 20 percent. Since the election he has given indications he might not raise the top rate right away.

Using available tax data for 2005, the composition of the business community for tax purposes consisted of 21,467,566 Sole Proprietors; 1,987,171 C Corporations; 3,684,086 S Corporations; 2,763,625 Partnerships; and 1,981,249 Farms for a total of 31,883,697 businesses.

For federal tax purposes, most Limited Liability Companies (LLCs) elect to be taxed as partnerships whether they choose to organize like a corporation or partnership and they are included in the partnership column. There were approximately 1,465,000 LLC-Corporations and 100,000 LLC-Partnerships.

For S Corporations, 0.35 percent of S Corporations with gross receipts in excess of $50 million report 34 percent of S Corporation gross receipts. At $10 million in gross receipts, 2 percent of S Corporation report 55 percent of the gross receipts.

There are approximately two million C Corporations and there are a substantial number of C Corporations among the WMMA membership.

The income of a C Corporation is taxed directly at the corporate level. Shareholders are taxed on dividend distributions of the corporation's after-tax income (the dividend is not deductible by the corporation.)

C Corporations are taxed at a top rate of 35 percent for taxable income over $10,000,000. The benefit of graduated rates below 34 percent is phased out for corporations with taxable income between $100,000 and $335,000, and the benefit of the 34 percent rate is phased out for corporations with taxable income in excess of $15,000,000.

In addition to the regular corporate tax, the Code provides for an additional tax paid by the corporation at the top individual rate, imposed on certain corporate earnings that are not distributed to shareholders. An "accumulated earnings tax" can be imposed on certain earnings in excess of $250,000 ($150,000 for certain service corporations in certain fields) accumulated beyond the reasonable needs of the business.

C Corporations with over $50 million in gross receipts, which represent approximately 0.86 percent of all C Corporations, collect 85 percent of gross receipts of all C Corporations.

A marginal rate is the rate at which the last dollar of income is taxed. If the discussion expands to a broader discussion of tax reform, then effective rate of taxation is important. Technically, in the tax economists' world, the phrase is the average rate of taxation (taxes paid divided by taxable income.) When they refer to average effective rate, it is taxes divided by a broader definition of total "economic" income. We are not tax economists and for a discussion of what elements of the tax code and structure are important to business, we use the term "effective rates" and we mean taxes paid divided by taxable income.

There are countless deductions, credits, and other factors that determine a business' effective rate of taxation by virtue of their adjustment of taxable income. A big one that WMMA fought for is the one that allows manufacturing businesses to reduce their taxable income by a percentage of the income received from domestic production activity. The reduction is equal to 6 percent of the income from manufacturing, construction, and certain other activities specified in the statute, for taxable years beginning in 2008 and 2009. Thereafter, the reduction is increased to 9 percent.

If Congress offers to lower the top C Corporation rate, it will be asking for concessions such as the elimination of the domestic income reduction. The reduction can be taken by S Corporations as well and if their rate is being increased, it would be a double whammy. Maybe it is not a concern if we can migrate everybody to C Corporation status. But, also coming up soon is the expiration of the temporary low dividend rate. The migration might not look as attractive then.

Complicated? Yes. That is why we have to know what is important in determining our effective rate of taxation, not just the marginal rate of taxation. Time to get ready and do our homework.

International Business Development

International Trade: Year in Review by Harold Zassenhaus, zemg@erols.com

I started the year writing about domestic and international markets reacting to supply and demand (that is, globalization), the resulting natural ebbs and flows in trade and, therefore the need for members to adopt international business strategies to remain competitive; I'll end the year on the same theme.

In a nutshell, nothing is proving the interdependence of nations more than the events of the past four months. For perhaps for the first time, all major nations are in or facing a recession. And, rather than natural trade ebbs and flows, we are being battered by quick and large swings in trade and currency movements.

Trade figures have not been released for the last quarter of 2008. However, when they are it wouldn't be surprising if the U.S. as well as our major woodworking equipment trading nations recorded huge swings in trade flows.

Reflecting the financial crisis in the U.S., Europe and elsewhere and the natural tendency to hang on to "safe" currencies and commodities in times of uncertainty, the U.S. dollar's value has risen over the past year, particularly over the last three to four months. The following table summarizes the Dollar's and Euro's climb against the currency of some of our major trading partners compared to a year ago.

Foreign Currency
% change in US Dollar Value 12/9/08 vs 12/9/07

% change in US Dollar Value 12/9/08 vs 12/9/07

Australian Dollar
33

17

Brazilian Real

47

29

Canadian Dollar

25

10

Chilean Peso

36

20

Chinese RNB

(7)

(18)

European Euro

14

-

Indian Rupee

28

11

Mexican Peso

26

10

New Zealand Dollar

43

26

Polish Zloty

25

7

Russian Ruble

15

1

UK Pound

37

20

It's not a pretty picture. All of a sudden our machinery is 25 percent more expensive to our Polish customers. However there are two factors shown above that soften the blow a bit: (1) the Euro appreciated as well so, U.S. price points, compared to European competitors, will not be seen as so great and; (2) China's currency value has increased compared to the Dollar and Euro making their products more expensive in the U.S. and Europe.

I would expect the U.S. dollar will begin to level off as the financial crisis abates, the recession finds its bottom and consumer confidence begins to climb. However, in the meantime, the stronger dollar will be a concern: our products are going to find resistance in many overseas markets and our European competitors will be reducing prices in the U.S. not only as a reflection of the dollar's climb but also as foreign competitors try to make sales any way they can. And, I would expect there to be wild swings in currency values as we have witnessed over the past quarter.

Furthermore, the global economic crisis is causing some countries to reevaluate their commitment to free or freer trade if they ever had one. China, for example, recently announced a stimulus package that would include increased incentives to its companies to export. Some European countries may enact export incentives as well to stimulate domestic production. Russia initiated a high export tax on log exports only to withdraw it for further consideration at the request of Finland and some of its domestic log traders. As an aside, more than likely Russia will go forward with log export restrictions in favor of its developing downstream industry.

Events of this year in particular have shown that countries increasingly are tied to one another. And, 2009 will not be an easy year for exporters. However, as bad as it may get, the times only reinforces the concept that to remain competitive, U.S. companies need to pay increasing attention to events taking place globally. Implementing a general international game plan is not an option; it is a growing necessity. Developing proactive country strategies where competitive advantages dictate is a necessity. I repeat what I stated at the beginning of this year: seriously weigh the advantages of becoming active internationally; take stock of your advantages; assess what you should and could do to take advantage of the ebbs and flows of international commerce and—ACT.

Promueble Furniture Supplier Show 2009, Guatemala, Central America, March 12-14, 2009

PROMUEBLE is the largest furniture manufacturing, woodworking, and forestry show in Central America. The U.S. Commercial Service can provide assistance to your company in this show and market, even if you are not able to exhibit.
During last year's show, the U.S. Commercial Service provided business facilitation services to WMMA members Tiger Stop, Black Bros. Co., Southeast Tool, and other woodworking machinery, cutting tools and supplies companies. Two of those companies are already working with a local distributor and the others are promoted at other local trade events in the construction and hardware industry.
If you would like more information on this unique marketing opportunity, contact Commercial Specialists Javier Fortin at Javier.Fortin@mail.doc.gov or George Thomas at George.Thomas@mail.doc.gov.

BUSINESS DEVELOPMENT

Sales Forecasting Tools (Members Only)

telescope-Sales Forecasting Tools Construction Put in Place - October 2008

Gross Domestic Product - Third Quarter 2008 (Preliminary)

Manufacturing and Trade Inventories and Sales - September 2008

New Residential Construction - October 2008

Purchasing Managers Index - November 2008

U.S. Leading Indicator - October 2008

NEWS YOU CAN USE

The U.S. Department of Commerce Helps Prepare WMMA Members in Overseas Sales Trips

U.S. Department of Commerce, U.S. Commercial Service assisted WMMA participants in WOODEX 2009 in Moscow before members even departed the USA. The WMMA management team prepared a briefing book for all participants from research provided by the Commercial Service. WMMA Export Consultant Harold Zassenhaus then coordinated a presentation about the Russian market by William Thorn, the Commercial Attaché in the U.S. Embassy.

The read-ahead briefing book sent to members going to the show contained the following:

C.I.A World Fact Book

You Can Benefit, Too
Through U.S. Export Assistance Centers (USEAC) around the country you can contact a trade specialist to prepare similar research for you before going on an overseas sales trip. If you do not already have a contact at nearby USEAC, go to www.export.gov and enter in your zip code to find the nearest office.

If you want assistance to meet a local trade specialist, please contact George Thomas, Senior Trade Specialist in the Charlotte, NC, USEAC. He is on the Department of Commerce team assisting with the grant of $180,000 WMMA recently received to launch the India Service Center. He will identify a local trade specialist in the USA for you and make an introduction. His email address is George.Thomas@mail.doc.gov.

EDUCATION & SCHOLARSHIP

Invest in Woodworking Industry Education

Schools near you are ready to provide woodworking industry education to the next generation of your employees! Over 80 schools in 20 states provide the WoodLINKS USA program to more than 8,000 students. Twenty schools are waiting to become active providers of the WoodLINKS USA program. Please consider partnering with WoodLINKS USA by committing to an annual donation. WoodLINKS only needs 1,000 companies giving $100.00 annually to make a difference.

For further information, please visit the WoodLINKS web site or contact Mark Smith, national program director of WoodLINKS USA at woodlinksusa@netcare-il.com.

ASSOCIATION NEWS

How Are Members Responding to Current Conditions?

Many members have asked WMMA and one another: What strategies and tactics are other wood industry companies using to deal with an unprecedented economic situation? To assist members to network, WMMA would like to put together a convenient forum for members to share their experience and perhaps take away some good, better and best practices that would work in their own situation.

What would be easy and convenient for you? Some suggestions are an open conference call, a webinar format or using the web site's online bulletin board.

Click here to email Association headquarters with your suggestions as to the best format. Let us know!

Public Policy Fly-In—Registration Deadline—January 9, 2009

Members—Click here for quick and easy online registration.

The Second Annual Woodworking Equipment & Wood Processing Fly-In
February 9 - 11, 2009
Washington, DC
Held in Conjunction with WMMA Committee Meetings

Archive Recording of "Economic Forecasting Webinar" Now Available

What if you could have predicted the current economic situation three to four years ago? Would you have done anything differently? The Institute of Trend Research (ITR®) has been advising WMMA members to prepare for the current economic situation for just that long. Using the very latest news and information, Alan Beaulieu discusses what you need to consider in order to chart a reasoned course through this turbulence. WMMA is pleased to offer this exclusive webinar archive recording for both members and the woodworking industry at large.

WMMA Members—$50 per location. Click here for more information.

Woodworking Industry Professionals, $100 per location—Click here to register.

WIC 2009—Equipping You to Succeed in Challenging Environment

April 29, 2009 - May 2, 2009
Sawgrass Marriott Resort & Spa Ponte Vedra Beach, FL

Look for your registration packet in mid-January.

Nominations Now Open for the Ralph B. Baldwin Award of Excellence

Do you know someone who has made outstanding contributions to manufacturing, the wood industry, your company and/or to WMMA? Take a moment now to consider honoring an individual whom you believe deserves this highly recognized industry award. Member companies are invited to review the award description, competition rules and past winners, and submit their ballots to headquarters. Click here.

Housing Industry Thrives in One Corner of Atlanta

As volunteers added the last finishing touches to their new homes at a special dedication event Saturday, November 22, Atlanta Habitat for Humanity's newest homeowners Linette Perkins, her two young boys and Elenor Jackson and her daughter met and spoke with WMMA Executive Vice President Ken Hutton. Ms. Perkins and Ms. Jackson warmly thanked him for their kitchen cabinets made by WMMA members during IWF 2008.
"I was especially moved by the sincerity of Linette and Elenor and the joy and pride shown by their families," said Ken Hutton. "I was also impressed by the wonderful neighborhood of Atlanta Habitat homeowners and the hundreds of volunteers who showed up at this celebration. I think our WMMA members can be satisfied that the product we made during the show will be cherished by these hardworking ladies and other Atlanta families for years to come."
The U.S. Technology & Demonstration Center—3,600 square feet of U.S. wood machinery manufacturing know-how at IWF 2008—showcased WMMA members demonstrating a cell approach in assembling a complete production line of kitchen cabinets. The "made in Atlanta" cabinets were donated to Atlanta Habitat for Humanity and the Atlanta Habitat Restore.

Ken Hutton conducting WMMA business at the U.S. Technology & Demonstration Center at IWF 2008 where members manufactured the cabinets donated to Atlanta Habitat

The new Perkins and Jackson homes are the 1,000^th and 1,001^st homes built by Atlanta Habitat and were celebrated at a "Building Block" Party attended by Ken Hutton, other major donors, as well as local officials, volunteers and homeowners. Located side by side in the Lakewood Commons neighborhood, the house builds took place over eight days. As one of the city's most productive affordable housing builders, Atlanta Habitat celebrated the achievement of constructing its 1,000th and 1,001st homes in its 25th year with community events throughout the month of November.

"It was inspiring to see these families, new homes and Atlanta Habitat's exciting expansion plans for the future in the midst of a massive downturn in the housing industry," added Ken Hutton. "I was proud that the WMMA membership had such a meaningful impact."

The Building Block Party festivities concluded with an exuberant performance by the Atlanta Drum Line, which wowed the audience. "My ears are still ringing," said Ken Hutton.

Ken Hutton with the Jackson family,
Atlanta Habitat for Humanity
1,001st homebuyer.
Photo: Ben Rose

Ken Hutton with Linette Perkins, Atlanta Habitat for Humanity 1,000th homebuyer, in front of her new kitchen cabinets.
Photo: Ben Rose
Ken Hutton receives a donor recognition plaque for WMMA’s contribution from Larrie Del Martin, Atlanta Habitat for Humanity President and Executive Director.
Photo: Ben Rose

The stage is set at the dedication ceremonies.
Photo: K. Hutton
Volunteers perform last minute touches to one of the new homes.
Photo: K. Hutton

Volunteers perform last minute touches to one of the new homes.
Photo: K. Hutton
A banner at the site of the new homes acknowledges all of the donors, including WMMA
Photo: K. Hutton

The Tide Is Turning, According to Latest Cost Study of The Manufacturing Institute

A combination of favorable U.S. policy changes advocated by the National Association of Manufacturers (NAM), actions by manufacturers to innovate and manage structural costs, and rising costs among major international competitors have contributed to lowering the aggregate cost burden faced by U.S. manufacturers over the past two years, according to an updated cost study by NAM's The Manufacturing Institute. Still, an excessive cost burden of 17.6 percent is a serious impediment to the ability to compete in the global economy. U.S. companies pay the second highest corporate tax rate in the world. One of the first goals to get the U.S. economy growing again must be to bring corporate tax rates under control.

Click here to access the cost study, The Tide Is Turning: An Update on Structural Cost Pressures Facing U.S. Manufacturers.

John Satagaj Contact Information Has Changed

As a free benefit of membership, all WMMA members are able to call WMMA Legislative Counsel Satagaj and seek his general legal advice on a variety of issues, from taxes to employment issues. He has new contact information:

209 Loudoun Street, SW
Leesburg, VA 20175
Tel: (703) 340-9596
Fax: (703) 771-2673

2008 in Review

IWF 2008. The U.S. Technology & Demonstration Center—A WMMA Community Project marked the first time ever that an association built a series of manufacturing processes with equipment, tooling, and supplies from member companies and produced an end-use product, which in turn was donated to Atlanta Habitat for Humanity. Twenty-three member companies participated. Plan to join the next Demonstration Center.
WIC in La Quinta, CA. Members had another great conference in a wonderful location featuring a comprehensive educational program including a general session, workshops and forums, a Contact Table program, and numerous networking opportunities to socialize with peers and industry friends. Plan now to attend the 2009 WIC, April 29 - May 2, in Ponte Vedra Beach, FL.
The First Annual Wood Equipment & Wood Processing (WP&WE) Public Policy Fly-In. Again, WMMA led the way. WMMA re-branded a successful Association program to broaden its appeal to the industry. Members made an impression with lawmakers responsible for legislation and regulations which impact their businesses. Their success was due in large part to WMMA's Public Policy Committee efforts. Plan now to attend the 2009 WE&WP Fly-In, February 9 - 11 in Washington D.C.
Exporting Opportunities Abound. Ten members have formed the core of a pilot project to establish a Service Center in India. The project recently secured a $180,000 grant under the Market Development Cooperator Program from the U.S. Commerce Department. Twelve members formed a pavilion to explore the market in Moscow. Look to expand your exporting profile at Ligna '09.
Business Forecasting Tools. Members continue to position their businesses for future success by using business forecasting tools and reports through a strategic partnership with ITR, a leading economic consulting firm who provided an outstanding tutorial webinar on November 25th. Check the WMMA website for the latest data.
Cost Containment Solutions. Through strategic partnerships with leading industry service suppliers, WMMA maintains discounts for leasing rates/services, R&D tax credit preparations, web site development and e-Business strategies, insurance, shipping, etc. Every dollar saved through the WMMA Cost Containment Solutions goes right to your bottom line.
Manufacturing Workshops. A series of lean manufacturing-focused educational workshops and webinars continued during 2008. Look for more webinars in 2009.

MEMBER NEWS

Welcome New Associate Member

WoodProm, LLC
193 Walnut Tree Hill Road
Sandy Hook, CT 06482
P: 203-493-3394
www.woodprom.com
Rinat Khisyamov, President

WoodProm is a sales and marketing organization selling sawmill and woodworking equipment in Eastern Europe and Russia.

Microvellum Supports Educational Programs throughout the Country

WMMA member Microvellum, Inc. has donated a full software suite to St. Mary's Academy and College located in St. Marys, Kansas. St. Mary's is a private school located in rural northeast Kansas, with over 190 high school students attending. Beginning 2009, St. Mary's will expand the curriculum to incorporate a "Manufacturing Enterprise: Custom Cabinet Making" sequence, which will be a design and production curriculum for grades ten through twelve… Cabinetry students in the Kent, Ohio, TRHS WoodLINKS program were given an early Christmas present this year from national sponsor Microvellum. Students received t-shirts and mechanical pencils to accompany a donation to the program of a $100,000 cabinet design and manufacturing software package.

Contents

Cutting Edge Newsletter™ December 2008

Business Briefing

PUBLIC POLICY

International Business Development

BUSINESS DEVELOPMENT

NEWS YOU CAN USE

EDUCATION & SCHOLARSHIP

ASSOCIATION NEWS

MEMBER NEWS